Byblos Bank releases Real Estate Demand Index for Q4 2017

The results show that the Byblos Bank Real Estate Demand Index posted a monthly average of 44.9 points in the fourth quarter of 2017, constituting a decline of 9.3 per cent from 49.6 points in the third quarter of the year and a decrease of 3.3 per cent from 46.5 points in the fourth quarter of 2016.

The results constitute the 14th lowest level in 42 quarterly readings.span style="font-family: Calibri;">Further,the Index’s average monthly score in the fourth quarter of 2017 is 65.7 per cent lower from the peak of 131 points registered in the second quarter of 2010 and remains 59.1 per cent below the annual peak of 109.8 points posted in 2010. Also, it is 26.3 per cent lower than the Index's monthly trend average score of 61 points since the Index’s inception in July 2007.

"Demand for housing in Lebanon is primarily correlated to political stability, consumer confidence and economic activity. As such, demand for residential real estate in Lebanon decelerated in the fourth quarter of 2017, as the resolution of the political crisis that was triggered by the resignation of Prime Minister Saad Hariri in November could not offset the impact of the Lebanese parliament’s ratification in October 2017 of a series of tax increases on consumption, income and profits,” said Nassib Ghobril, Chief Economist and Head of the Economic Research and Analysis Department at the Byblos Bank Group.

Ghobril noted that the negative impact of the tax hikes on sentiment will weigh on the willingness of prospective buyers to acquire a residential unit, given that buying a house constitutes one of the most important investment decisions for the Lebanese, and the value of a house is usually the single most important non-financial asset for Lebanese residents. He therefore cautioned Lebanese residents to consider that the increase in taxes and fees will negatively affect their disposable income and purchasing power. This will impact their already-stretched budgets and increase real estate transaction costs, which in turn, will hold back demand and delay the recovery in real estate activity.

The answers of respondents to the Index's survey questions in the fourth quarter show that demand continues to be soft, as only 5.1 per cent of Lebanese residents had plans to either buy or build a residential property in the coming six months. In comparison, 6.9 per cent of residents in Lebanon, on average, had plans to buy or build a residential unit in the country between July 2007 and December 2017, with this share peaking at nearly 15 per cent in the second quarter of 2010. Ghobril pointed out that the Index's results reflect the intentions of the Lebanese to buy or build a house, but those intentions require a conducive environment to translate into actual sales, which requires immediate measures and incentives.

The results of the Index show that demand for housing was the highest in the North in the fourth quarter of 2017, as 9.8 per cent of its residents had plans to build or buy a house in the coming six months, compared to 9.7 per cent in the preceding quarter. Beirut followed with 4.6 per cent of its residents planning to build or buy a residential unit in the coming six months relative to five per cent in the third quarter of 2017; while 4.5 per cent of residents in the South had plans to buy or build a house, up from 3.4 per cent in the preceding quarter. In addition, 4.3 per cent of residents in Mount Lebanon intend to buy or build a house, down from 5.7 per cent in the preceding quarter, while 2.1 per cent of residents in the Bekaa had plans to build or buy a residential unit, down from 2.8 per cent in the preceding quarter. In parallel, real estate demand decreased among all income brackets in the fourth quarter of 2017.

In parallel, the full year results show that Byblos Bank Real Estate Demand Index averaged 47.6 in 2017, constituting an increase of 13.7 per cent from a low base of 41.9 in 2016. However, the Index's average monthly score for the year was 56.7 per cent below the annual peak of 109.8 points posted in 2010, and remained 22 per cent lower than the Index's monthly trend average score of 61 points since the Index's inception in July 2007. The Index declined in three out of four quarters during the year. It reached its peak in June and its lowest point in March of 2017. Commenting on the full-year results, Mr. Ghobril noted, “the steep decline of the Byblos Bank Real Estate Demand Index in the third and fourth quarters of the year shows that the negative impact of the tax hikes on sentiment and, therefore, on housing demand, is a lot more significant than any potential positive impact of the much-hyped public-sector wage increase.”

The Byblos Bank Real Estate Demand Index is a measure of local demand for residential units and houses in Lebanon. The Index is compiled, implemented and analysed in line with international best practices and according to criteria from leading indices worldwide. The Index is based on a face-to-face monthly survey of a nationally representative sample of 1,200 males and females living throughout Lebanon, who reflect the demographic, regional, religious, professional and income distribution of Lebanon.The surveyed persons are asked about their plans to buy or build a house in the coming six months. The Byblos Bank Economic Research and Analysis Department has been calculating the Index on a monthly basis since July 2007, with November 2009 as its base month. The survey has a margin of error of ±2.83 per cent, a confidence level of 95 per cent and a response distribution of 50 per cent. The monthly field survey is conducted by Statistics Lebanon Ltd, a market research and opinion-polling firm.